The Free Trade Air Force?

The malign influence of Sen. John McCain could again undermine
the indispensable procurement of refueling tanker aircraft.

By Jed Babbin – 7.6.10

For nearly a decade the Air Force has been trying to replace its Eisenhower-era fleet of refueling tanker aircraft. It has failed twice in rather spectacular fashion. Once because a senior Boeing executive bribed an Air Force procurement chief with a job offer. And once because the Air Force broke federal contracting rules to award the contract to Boeing's competitor (then a Northrop Grumman–European Aerospace Defense Systems consortium) for a too-large and too-slow Airbus aircraft.

And the double failures were due, in part, to the malign influence of Sen. John McCain (R?-AZ), who has been to the Air Force what malware is to your laptop.

This time, my alma mater had bloody well get it right. There is no more room for error. The refueling tanker is the most urgent and crucial weapon system acquisition in among all the other things the armed forces need. And that's because the aged fleet of 415 KC-135s is too old, frail, and worn out to perform the mission.

Our KC-135 tankers are on average 46 years old. Only about 38 of them were able to fly in Operation Iraqi Freedom, and though many have been re-engined and maintained at great expense, too many cannot fly the unfriendly skies and the number that are on "operational restrictions" continues to climb. If a class-wide problem develops that grounds the whole fleet, it would impose catastrophic limitations on almost everything our military does. The older the fleet gets -- and the harder it's used -- the likelihood of such a class-wide problem grows every day.

According to an Air Force briefing given when the last tanker procurement failed, the plan to buy fifteen aircraft per year -- a very ambitious plan -- will still mean the last KC-135 will be eighty years old when it is retired. We need to buy the right new tanker, and get it in the air as fast as possible.

Without the tankers, fighters can't fight, bombers can't bomb, and transport aircraft can't enable the deployment of American forces around the world in a matter of hours. In short, no tankers, no superpower. Buying replacements should be pretty simple. But it's not, because the Europeans contend that any restriction of the tanker buy to U.S.-built aircraft -- regardless of the reason -- is protectionism.

Those objections come from nations that refuse to invest in their own defense. European defense budgets -- minuscule already -- are being slashed to save social welfare programs across the EUnuchzone. And it should surprise no one that the French, according to one report, are increasing subsidies to restaurants by € 3 billion while cutting € 5 billion from their defense budget.

But those subsidies and cuts aren't the issue on the tanker. The French, British, Spanish, and German subsidies (called "launch aid") to Airbus are.

Later this week, the U.S. Air Force will receive yet another round of bids (called proposals in Pentagon contracting jargon) from the two companies competing for the 179-aircraft, $30 billion-plus program. One key question is whether the Air Force will account for the Euro subsidies in evaluating the prices proposed by Boeing and Airbus.

John McCain has said repeatedly that they shouldn't and conducted a years-long campaign to prevent the Air Force from counting the subsidies against the Airbus price. But the Air Force can, and must both ignore McCain and factor in the subsidy.

The purpose of adding the subsidy is to level the playing field. If the French want to subsidize their aircraft workers to sit around smoking Gauloises, we don't need to contribute $30 billion in U.S. dollars to their subsidies.

But last week, the World Trade Organization ruled that the "launch aid" subsidies that European nations use to enable Airbus to compete with Boeing were illegal.

At issue in the U.S. complaint against the EU subsidies were the "launch aid" low-cost loans, an indeterminate amount of which are never repaid, and other subsidies to a whole range of Airbus aircraft ranging from the huge new A-380 to the huge and not-so-new A330-200, which is the aircraft Airbus is offering to the Air Force for the tanker deal.

In truth, the Air Force should never have to consider the subsidies because the A330-200 is too big and too slow to perform the mission. As I've explained before, the laws of physics are the same wherever you go, and bad things happen when you ignore them. The A330 is too big, has too low a top speed and cannot accelerate fast enough to perform the tanker's job of refueling our fighter aircraft. You'd have to assume that it could break the laws of physics to do the job the Air Force requires.

So price shouldn't be an issue for the Airbus. It should be excluded from the competition before that question comes up. That the Air Force didn't exclude it the last time around is one of the principal reasons the Government Accountability Office overturned the last contract award.

But what if the Air Force again listens to McCain and the EUnuchs who want us to ignore mission requirements in favor of competition?

The 1,000-page June 30 ruling by World Trade Organization is on the U.S. complaint which calls out French, German, British and Spanish government aid, specifically including subsidization of the A330-200 from which their tanker offer is derived. Among the many subsidies are "launch aid" loans -- LA -- and "member supplied financing" -- MSF.

The report concludes that the U.S. has proved its allegations that the LA and MSF subsidies given Airbus, including those directly related to the A330-200, are illegal under international trade agreements.

One of the fallacious arguments McCain has made over the past few years is that no one can define how much the subsidies mean to the Air Force competition. But is it logically impossible? Hardly. The Air Force must calculate and include the subsidies in accordance with a few simple principles.

The first is to ignore John McCain, who has bluffed and blustered in Airbus'sfavor. The Air Force isn't the Free Trade Force.

Second, the Air Force should reject pressure to exclude the subsidy issue on the basis of the coming appeal of the June 30 ruling by the EUnuchs.

Third, the WTO report shows French subsidies of the A330-200 to amount to 7.8 billion French francs. At the time that France converted to the euro at the end of 2001, the exchange rate was 7.36 francs per dollar.

The calculation is then simple. At 7.36 francs per dollar, the 7.8 billion franc subsidy means $1.05 billion in subsidies to the A-330/200.

The Air Force should calculate the subsidy provided to the 179 aircraft Airbus offers as follows: divide the $1.05 billion by the sum of the number of A-330/200's sold so far (578, according to the Airbus website) and the 179 offered to the Air Force, which is a total of 757 ($1,387,054 per aircraft). Multiplied by the 179 aircraft offered, the Air Force should add $248,282,670 to the price bid by Airbus.

Free trade is one thing, fair trade another. I'm for fair trade. Especially where the French are concerned.

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